Assume That the Risk-Free Rate Is 6% and the Market

question 67

Multiple Choice

Assume that the risk-free rate is 6% and the market risk premium is 5%.Given this information, which of the following statements is CORRECT?

• A) If a stock has a negative beta, its required return must also be negative.
• B) An index fund with beta = 1.0 should have a required return less than 11%.
• C) If a stock's beta doubles, its required return must also double.
• D) An index fund with beta = 1.0 should have a required return greater than 11%.
• E) An index fund with beta = 1.0 should have a required return of 11%.

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